Klebsiella strain RE1544 contains two lac operons, one on the chromosome and one on a lac plasmid. A mutant of RE1544, in which the lacZ genes of both operons produce no active enzyme, was found to synthesize a beta-galactosidase that hydrolyzes ortho-nitrophenyl-beta-D-galactopyranoside but not lactose. Synthesis of this beta-galactosidase (BGase-III) is induced by lactose but not by isopropyl-1-thio-beta-D-galactopyranoside or methyl-beta-D-thiogalactopyranoside. In both the regulation of synthesis and substrate specificity, BGase-III strongly resembles the ebg0 enzyme of Escherichia coli. Nevertheless, by the criteria of immunological cross-reactivity and subunit molecular weight, BGase-III is not related to the ebg0 enzyme.